By: Wade Slome, President & Founder, Sidoxia Capital Management

December 19, 2015 8:24 pm EST

While investors were recently fretting over post-Fed rate hike volatility, I recently opened my car trunk, and it wasn’t a pretty picture. I discovered towels, jumper cables, soccer ball, beach chair, research reports, and even a box of Kleenex. The hodge-podge of items had been accumulating for months, but the path of least resistance to solving this problem was procrastination. It didn’t take much effort, but eventually I transformed my portable dumpster into a clean, useful space of organizational Zen.

Many investors have a similar problem with their scattered finances…an IRA here, 401(k) there, trust account, savings account, bank CD, insurance policy, and not to mention a slew of other spouse accounts. Is there any cohesive strategy behind these accounts? Generally, the answer is a resounding “no”. Like a messy car trunk, a sloppy controlled investment portfolio with no objective, time horizon, or defined risk tolerance could drive your retirement off-road into a ditch.

With the year coming to a close, and a finish to this season’s holiday parties and gift opening, often times there is a brief calm before the New Year’s storm. This is a perfect time to clean out your cluttered financial trunk to make sure you are on track to meet your retirement goals.

The first step in de-cluttering your financial mess is determining what is your targeted retirement number (see Getting to Your Number). Doing so requires you to calculate the following:

  • Your annual budget
  • Annual income
  • Planned retirement date
  • Life expectancy

Combining this data with your risk tolerance and expected return should help you ascertain whether your retirement goals are realistic or overly optimistic.

After you find a reasonable dollar figure target for retirement you can give yourself a pat on the back, but the financial organizing game is not over yet. You still need to incorporate various important facets of financial planning when arranging your fiscal affairs. Here are some financial planning priorities on which to focus:

  • Estate Planning:  Rich or poor, it doesn’t matter…you still need to have an estate plan in place. A suitable estate plan includes important documents, like a living trust, will, financial power of attorney, and advanced healthcare directive. Without these critical documents, heirs could be left spending thousands of dollars, and fighting years with courts and family members over rightful transfers of assets.
  • Tax Planning:  When optimizing your finances, one cannot forget about the IRS. One does not need to be Al Capone to lower your tax bill – there are plenty of ways to legally lower your tax liability. Contributing to your 401(k)/IRA accounts and recognizing various deductions (e.g., charitable contributions, business write-offs) are some low hanging fruit strategies to keeping more of your money. Consult a tax professional for more specific guidance.
  • Insurance:  Building your nest egg requires a lot of effort, so protecting it should be a key priority. Medical bills are the number one cause of personal bankruptcies, so mitigating these risks is paramount. Life insurance products mixed with investments generally are over-priced and overly complex. Term life insurance is often a much more cost effective and simplified approach.
  • Home Management: Given the home is the single largest personal asset for most families, home insurance is an essential, and researching an umbrella policy that protects your nest egg against unexpected potential litigation is not a bad idea either. With interest rates near generational lows, it behooves you to explore mortgage refinance possibilities as well.

Financial market volatility may continue through year-end into next year, but sitting on your hands and doing nothing will not advance you towards financial prosperity. Cleaning up your messy financial trunk with comprehensive investment and financial planning (not procrastination) is the correct path to reaching your Zen-like retirement goals.

The views and opinions expressed herein are those of the author(s). Core Compass’s Terms Of Use applies.

AUTHOR'S DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs), but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through this article constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision.

About the author

Wade Slome, CFA, CFP®, is President and Founder of Sidoxia Capital Management. Sidoxia is a full service investment management and advisory firm that provides a wide range of financial services to high-net-worth individuals, family trusts and institutions.

retirement planning
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